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Housing demand could well average 1.6 million units a year over the coming decade, according to a new study by the Mortgage Bankers Association. Recently the United States has added about a million units a year, and I’ve been expecting 1.2 million in the coming years. The new report is eye-opening. (A hat-tip to Keith Balter for pointing me to the report.)

The study begins with the Census Bureau’s long-term population projections. When you know how many women are in each age group, estimating births is fairly easy, though there has been a recent trend toward childbearing later in life. The number of deaths is fairly easy to estimate given the population by age. The sensitive issue here is net international migration. The Census bureau projections put that figure at about 1.27 million per year. We have been getting just about one million per year since 2000. Back around 2000 the Census Bureau estimated 1.4 million net migrants a year (including both legal and illegal immigrants).

Taking these projections of population as a starting point, the Mortgage Bankers team (Lynn M. Fisher and Jamie Woodwell) then developed household projections, working from details of population by sex, age and race. A key finding was:

Even if sex-, age- and race-specific household formation rates remain at low 2014 levels, over the next decade, these demographic changes alone should account for 13.9 million additional households in the United States [which is 1.39 million per year].

New households turn into demand for housing units. Two interesting questions remain: will they live in multi-family housing or single-family homes, and will they own or rent. Those used to be wrapped up in a single decision, but there’s more flexibility now, as I pointed this out in my highly read article, “Should You Buy A House Or Rent? The Economics Of Homeownership.” The Mortgage Bankers report points out “In 2004, single-family rentals accounted for 16 percent of all households with an adult age 25 to 34. In 2014, they accounted for 22 percent.”

The split between single-family and multi-family has been very steady, much more so than the split between ownership and rentals. What of the future? The authors ignore the widespread belief that the Millennials will behave differently when they age than past generations did. Many believe that they will have a stronger preference for urban living than their parents did, which will dictate more multi-family living. Although I don’t personally buy that theory, it’s worthy of explicit consideration.

Overall, this report supports a more optimistic view of home construction and demand for building materials.